1966 (2) TMI 58 - HC - Companies Law

Court rules leasehold rights revert to lessor upon lessee's death

The court held that in the case of a permanent lease, the leasehold rights would revert to the lessor, not escheat to the Government upon the death of the ... Winding up – Power of court to assess damages against delinquent, directors, etc. Issues Involved:1. Whether the leasehold rights would revert to the lessor or escheat to the Government upon the death of the lessee without heirs.2. Competency of Mr. Mehra to execute the sale deed after the dissolution of Patel Mills Ltd.3. Whether the plaintiffs-appellants are estopped from obtaining possession over the disputed plot due to certain representations.4. Applicability of Section 53A of the Transfer of Property Act to bar the suit.Issue-wise Detailed Analysis:1. Reversion or Escheat of Leasehold Rights:The court examined whether, in the case of a permanent lease, the leasehold rights would revert to the lessor or escheat to the Government upon the death of the lessee without heirs. Bishambhar Dayal J. held that the rights escheated to the Government, relying on precedents like *Collector of Masulipatam v. Cavaly Vencata Narrainapah* and *Sonet Kooer v. Himmut Bahadur*. However, the court distinguished these cases, noting that the lease in question had a forfeiture clause and was not an absolute interest. The court concluded that the leasehold rights would revert to the lessor, not escheat to the Government, as the lessee's rights were carved out from the owner's rights and were capable of merging back into the lessor's rights upon the lessee's death without heirs.2. Competency of Mr. Mehra to Execute the Sale Deed:The court considered whether Mr. Mehra, who had ceased to be the liquidator of Patel Mills Ltd., was competent to execute the sale deed on 28th January 1941. Bishambhar Dayal J. relied on *Pulseford v. Devenish* to argue that a liquidator's duties continue even after the company's dissolution. However, the court distinguished this case, stating that Mr. Mehra had become functus officio and had no authority to execute the sale deed. The court emphasized that the Banaras Bank Ltd. should have approached the court for executing the sale deed rather than Mr. Mehra.3. Estoppel from Obtaining Possession:The court examined whether the plaintiffs-appellants were estopped from obtaining possession due to representations made by the lessors. Bishambhar Dayal J. observed that the lessors had accepted rent and did not challenge the liquidator's decision, which led the Banaras Bank Ltd. to believe it had valid leasehold rights. However, the court found that the acceptance of rent before the dissolution of Patel Mills was irrelevant and that actions taken under a misapprehension of legal rights do not create estoppel. The court concluded that the bar of estoppel did not operate against the plaintiffs-appellants.4. Applicability of Section 53A of the Transfer of Property Act:The court considered whether Section 53A of the Transfer of Property Act barred the suit. Bishambhar Dayal J. had held that the section applied, but the court found that the plaintiffs-appellants, as pre-emptors, were not bound by the acts of the liquidator or Jugal Kishore. The court concluded that Section 53A did not apply to the facts of the case, as the plaintiffs-appellants' rights were independent of the rights of the person they ousted by filing a suit for pre-emption.Conclusion:The court allowed the appeal with costs, set aside the judgments of Bishambhar Dayal J., the first appellate court, and the trial court, and decreed the suit in favor of the plaintiffs-appellants with costs.